(Newswire.net — July 16, 2019) — Italy responds to EU penalty threats amidst many facets of economic decline. This Vestle article gives you the latest.
The ongoing saga of the Italian economy
Looking for some quality entertainment nowadays? You could tune into your favourite soap opera, or you could just read the news pertaining to Italy’s economy, where the daily ups, downs, and Dante-evoking hubris from Deputy Prime Minister Matteo Salvini should be enough to keep you thoroughly satisfied.
Why does it matter so much?
Italy is in a rather precarious position at the moment. It’s the third largest economy in the eurozone, with a 2018 GDP of $2.397 trillion and the eighth largest in the world by nominal GDP. However, at the moment Italy has the second highest debt burden in the EU at 133% of its GDP, just behind Greece.1
So what’s going on with the Italian economy? A lot, and in this Vestle article, we’ll be discussing some recent highlights.
European Union threatens disciplinary action
If you were to ask the EU’s opinion about all this, you’d get an earful about irresponsible fiscal behaviour. After breaking European Union debt rules in 2018 and looking like it’s about to do the same in 2019 as well as 2020, Italy was about to get its comeuppance from the European Commission in the form of disciplinary procedures. However, in early July the Italian government sprang to action and revised its spending plans, intending to temper the ongoing budget tensions with the EU by approving 2019 budget deficit cuts and sending yields on its two-year bonds negative. These yields, which move inversely to prices and are sensitive to economic and monetary policy, fell 9 basis points to a low of -0.003%.2 But it’s too soon to tell if these measures have been taken in time.
Matteo Salvini swoops in to save the world
Just days after his League’s victory in the European Parliament elections, Italy’s Deputy Prime Minister Matteo Salvini barged into the Italian Treasury told Finance Minister Giovanna Tria that, because of the pro-business stance of his League, he would be playing a bigger role in the country’s economic policy. We know what you’re thinking – it’s like a hotel owner thinking because he can run a company, he’d like to be president of a country, and win. But that’s exactly what Salvini is doing with this renewed vigour, and it’s really getting the attention of officials in Brussels. As the European Commission threatens to slap Rome with a fine of up to €9 billion, Salvini more or less is calling its bluff, arguing that the €15 billion tax cut he’s got in the works will bring the economy back to life and restore financial order.3
Italy reports lowest number of births since 1861
According to a study called ‘Is Fertility a Leading Economic Indicator’ done by the National Bureau of Economic Research in the US, there was a noticeable drop in conceptions either at the same time or just before a recession commenced. Sounds logical, right? If the news is telling you the economy is tanking and your bank account isn’t much different, the last thing most people want is another mouth to feed.4 That thinking might help shed some light on a report that just came out saying Italy’s population – the second oldest in the world – registered the lowest number of births on record in 2018. In numbers, that means 440,000 children were born in Italy in 2018, down 4% from the year before, and the lowest since 1861, the year Italy as we know it was created. The Financial Times even asserted that Italy might be facing a severe demographic crisis, which could affect the economy’s growth prospects long-term. Italy has the second largest amount of older people in the world (23% of the population is 65 or above) and that, coupled with a rising emigration rate (700,000 since 2014) it seems the boot-shaped country’s prospects are shrinking.5
The bottom line
Regardless of all the measures taken and plans in place, the Italian economy will take a while to show any considerable change. Add to that rising geopolitical tensions surrounding Salvini’s anti-immigrant sentiment and general disdain for the EU, there’s no telling what can be expected. Stay alert and up-to-date with the latest market performance reports at Vestle.
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